Q&A: Hong Kong a hub for illegal gambling, says FIFA’s former head of security Chris Eaton

Last month, US federal police in Las Vegas arrested eight Asians on charges of operating an illegal online betting ring. Among those arrested was Paul Phua Wei-seng, a Macau junket operator with a San Marino diplomatic passport, who police say is a “high-level figure” in Hong Kong’s 14k triad. Phua denied the allegation and the charges through his lawyer and said he would defend himself vigorously in court.

Phua told police that he had investments in IBCbet, a major online betting website based in Manila, Philippines, according to court documents. His son Darren told police Phua actually owned the website, which is considered by industry sources to be Asia’s largest online gambling website with billions of Hong Kong dollars in monthly turnover.

The South China Morning Post talked to Chris Eaton, a leading expert of crime in sport, about how online betting works and what exactly makes it a hotbed for crime.

Q. What accounts for the popularity of online betting sites? 

Firstly, its accessibility. Online is simple and easy and available on all communications devices. Then there is anonymity: Gamblers often use pseudonyms for direct access. Their details are only held by third party payments agencies. Another advantage is immediacy. Bets can be instantaneously adjusted as play unfolds, even betting against an original wager in attempt to break even or win.

Q. If they offer better returns to gamblers, what accounts for their huge profits?

Massive turnover! The operator of the website usually takes commission, averaging around 1 per cent of turnover.  They are really bet-traders. If they turnover US$1 billion a week, and many do, that’s a healthy income.

But most online operators use pyramid agency schemes to reach gamblers, especially in Asia  - Master Agents, Super Agents and the like. Some of these "independent" agents act as risk-books, in that they bet that the gamblers are wrong. A good risk book can make profits in excess of 50 per cent. They can also lose.

But this is where the real money is made and lost, between Master and Super Agents and high stakes gamblers, and sometimes these are the same people playing against each other, and as much of this is illegal activity, the opening to use match fixing to trick and cheat each other is enormous.

Q.  Some sites, such as IBCbet, require customers to be connected via an agent system. What is the purpose of this?

To preserve anonymity and to ensure that as a business they do not take any risk, their agents do. These big online businesses make about one per cent of turnover in commission.

Q. In a recent report, you estimate that 80 per cent of online betting was carried out on illegal markets. What is illegal about these bets online?

There are several bases of illegality, from the location of the gambler to the location of the bookmaker and parts in between. For instance an Italian gambler using a website in Asia owned by a business that is not registered in Italy is betting illegally, but the website not.  Some websites out of mainland China are up and closed in 24 hours. They are illegal of course, and operate using "trust" networks.

Q: Many of the sites seem to operate in an opaque manner. Are they subject to any form of regulation or monitoring?

This is the major challenge in Asia. Until the Philippines, Macau, Singapore, Malaysia, South Korea, are subject to transparent regulation, compliance reporting and genuine supervision such as operates in Hong Kong, USA and Europe for instance, they are completely vulnerable to cheating, corruption and criminal infiltration.

This is exactly what happened in international banking in the 1980’s until effective global regulation through the international Financial Action Task Force forced compliance. Sport betting needs at Gaming Action Task Force.

Q: What does Paul Phua’s arrest in Las Vegas mean for the online betting industry?

There is more to play out here, but the arrests in Macau and Las Vegas begin to officially expose the true wealth, greed and shady operations too commonly found in the global sports betting industry. This exposure must be driven further, deeper and led by governments in search of financial transparency, stability and for the protection of citizens and sport.

Q: What is Hong Kong and Macau’s role in the global online gambling industry?

Both have massive illegal on-line gambling operations, mostly but not exclusively feeding into and out of mainland China. They are most likely the world’s two biggest illegal operator locations. There are technical and criminal connection reasons for this, and only a massive coordinated regulatory and police effort can correct it.

Chris Eaton worked for the FIFA soccer federation and is now the Sports Integrity Executive Director at the Doha, Qatar and Paris, France-based International Centre for Sport Security.